It’s been a tough environment for Bolivian banks, where strong competition and increased liquidity in the financial system have resulted in a decrease in financial spreads and weaker results. But Banco Mercantil Santa Cruz (BMSC) has remained profitable despite these difficulties, maintaining its position as the country’s largest bank and expanding into different product sectors.
The bank ended the last fiscal year with deposits of $1.54 billion and a 20.69% market share. Going into 2011, BMSC decided to prioritize profitability over gaining market share through deposits. This meant relinquishing some large institutional deposits to save on interest expenses.
Because of this decision, the bank improved its efficiency in the usage of funds, since most of its loan portfolio growth was achieved with its available deposits.
According to Fitch, the bank this year has maintained adequate levels of profitability and efficiency. As of June, its profitability decreased in line with the system due to lower interest rates. The bank’s controlled administrative costs have contributed to a better profit generation in terms of return on equity (ROE) – which is superior to the market, according to Fitch.
Profitability for BMSC on an ROE basis was 18.58% in 2010 year-end versus 17.4% as of June this year. Its return on assets (ROA) also decreased slightly to 1.27% as of June 2011 versus 1.31% at year-end 2010.
BMSC has pursued aggressive growth in a variety of different products, such as its profitable consumer loans segment. Its loan portfolio grew by $170 million in 2010, more than 20%, and the bank ended last year with a loan portfolio of $959.6 million, accounting for 18% market share.
BMSC continues to keep its status as the largest bank in the country, with a strong position in the segments in which it operates. As of June 2011, BMSC counted $1.78 billion in total assets versus $1.75 billion at year-end 2010.
The bank’s growth has continued in the retail banking space which has enabled it to diversify risk. Of the $170 million loan portfolio growth, retail accounts for 65%. “In the past couple of years, the bank has seen an increase in short-term deposits for its focus on retail banking, a financing of low cost, representing a strength for the bank,” Fitch says.
The bank has opened two offices in the past twelve months in different cities and has introduced mobile banking services to its customers. Its ATM network was the first in Bolivia to offer service payments. About 20% of its branches now work with small and medium-sized enterprises (SMEs), in greater effort to show its commitment towards this segment. LF